Cross-Plan Offsetting and ERISA

February 1, 2020

  • Cross-plan offsetting occurs after a plan’s carrier or TPA determines that an out-of-network provider received an overpayment; the overpayment is “reimbursed” by offsetting the amount owed with another payment owed to the same provider under a different health plan. 
  • Many times, the alleged overpayments are made from an employer’s fully insured plan and the offset is taken from an employer’s self-funded plan. This can result in self-funded plan participants facing large “balance bills” or “surprise bills” if the provider seeks to recover the remainder of its charges that were offset by the TPA.
  • This practice raises many fiduciary concerns under ERISA, including the duties to monitor, to act prudently and to refrain from using plan assets for any purpose other than providing benefits to plan participants and beneficiaries and defraying reasonable administrative expenses.
  • The DOL believes cross-plan offsetting violates ERISA. Although dicta, the court in Peterson v. United Health Group also believes the practice likely violates ERISA. 
  • You can also be liable, as a plan fiduciary. You should ask your TPA if they engage in cross-plan offsetting and if allowable, best practices is to opt out of that practice.